Any follower of e-commerce news could tell you that this past
Christmas was quite a disappointment for many frantic online
holiday shoppers. News reports highlighted Web retailers turning
away last-minute shoppers wanting guaranteed delivery and
Toysrus.com's failure to deliver some promised packages by
Christmas day. Now Toysrus.com faces a lawsuit brought on by angry
parents who didn't receive their toys before the holiday. You
can avoid these kinds of problems by managing your inventory
properly and implementing well-organized back-end fulfillment and
shipping operations.

Melissa Campanelli is a technology writer in Brooklyn, New
York, who has covered technology for Mobile Computing &
Communications and Sales & Marketing Management
magazines. You can reach her at mcampanelli@earthlink.net.

Partnering Up

Entrepreneurs shipping large volumes especially should outsource
such back-end operations as customer service, order entry, order
management, fulfillment and customer returns. It's a good idea
to use referrals to find a smaller fulfillment company. But keep in
mind that some fulfillment houses turn away small businesses
because they're more costly to service than corporations that
ship large volumes of items. The variety of products being shipped
also affects service and price level-for example, it's more
costly and time-consuming to prepare packages that contain
different combinations of items than it is single-product
packages.

Before choosing a fulfillment partner, make sure you specify the
services you need, your expected volumes and your business'
terms, such as whether you'll pay handling on a
per-piece-picked basis or on a package-shipped basis. "Not
defining these terms ahead of time is the single biggest thing that
makes these outsourcing arrangements fail," says Bob
Hutchinson, managing director of KPMG's consumer markets supply
chains solution practice in New York City.

Going It Alone

If your company ships less than 20 packages per day, you can
easily fulfill and ship them on your own by using the software and
services from major shippers such as the U.S. Postal Service
(USPS), UPS and FedEx.

Software from these carriers can be used to process domestic and
international shipments, handle routing and billing, print labels
and pick-up records, track packages, order supplies and view
time-in-transit options. Customers can track shipments through
companies' Web sites; find estimated delivery times; and
compare, price and select the various shipping services.

Options offered for basic ground delivery run from overnight to
seven days. "Two to three days" is becoming the norm for
residential delivery.

Service First

Although standard delivery times for the big-name carriers are
well-known, always tell customers that the arrival of a shipment is
affected by such things as product availability and time of year.
For example, high-volume demands during holidays can bog down
shipments.

There are a variety of factors that determine the cost of
shipping, but, in general, USPS offers the least expensive
services. "For Second Day, also known as Priority Mail, [USPS
rates] are half the price or less," says Art Avery, principal
consultant at Avery & Associates, an e-commerce distribution
and logistics consulting firm located in Allentown, Penn-sylvania.
"UPS prefers to ship to businesses and from large shippers,
and they allow large shippers to get discounts off the published
UPS and FedEx rates."

In addition, Avery says, shipping to a "business ZIP
code"-that is, one where a lot of businesses are located-costs
$1 less than the official rates. The extra dollar you'd
otherwise pay covers the extra travel and fewer package stops
residential deliveries require.

Another advantage of USPS, says Avery, is it's the only
service that delivers to P.O. boxes. One drawback, though: USPS
isn't quite as technologically astute as the other
carriers-although that may improve in the future.

FedEx generally offers the most expensive service, but its new
two-to-five-day home-delivery program may become an enticing
option. The program allows customers to schedule their
delivery-even in the evenings. And UPS' recent announcement
that it plans to open a series of pack-and-ship stores this year
will give customers a new way to pick up their packages. For
details about these and other services, check out the carriers'
Web sites: www.usps.gov or
www.uspsprioritymail.com for
USPS, www.fedex.com for FedEx
and www.ups.com for UPS.

But meeting customer needs doesn't stop there. Shoppers
won't want to calculate shipping costs themselves, so make sure
your shopping-cart system works in conjunction with the
carrier's software to calculate those charges automatically.
You can even set up your system to configure shipping options based
on a set percentage of order costs-giving you the ability to offer
free shipping for orders above a set threshold.

Handling returns is another opportunity (sometimes missed) to
make customers happy. Fact: About one-quarter of all online
purchases are returned. To keep customers, you've got to have a
no-hassle return strategy in place. Customers like return policies
that say they can return products within 30 days for a prompt
refund. Smart companies go so far as to insert return labels in
their packages. Others put return forms on their Web sites; then
they can send authorization to their customers via e-mail and
notify a carrier to go pick up the package within one business
day.

Same-Day Service

Is it outlandish to think you can get your product to a
customer's doorstep in 24 hours or less? Not in today's
high-tech world. Many small businesses have already started
experimenting with same-day delivery.

Sameday.com in Los Angeles, California, is one such business. It
offers same-day delivery service to retailers who stock their
merchandise in Sameday.com's fulfillment centers. Currently,
Sameday.com can fulfill orders placed no later than 2 p.m. by 8
p.m. in Chicago, Los Angeles, New York City and San Francisco
(Atlanta, Dallas and Seattle to come). But expect to pay for the
convenience: Delivery charges average about $10 per order.

To date, Sameday.com has been used mostly by large companies
that can support inventory in multiple centers. But as e-commerce
customers get used to having their purchases delivered in a single
day, more entrepreneurial businesses should become interested.

"The e-commerce consumer, who is used to working with a
very interactive and quick process on the front-end, isn't
going to want to wait five to seven days," says Andrew
Krainin, Sameday.com's senior vice president of marketing.
"[The traditional] model doesn't really meet the needs of
people buying online."

Comparison Shopping

It pays to shop around.

Art Avery, a principal consultant at Avery & Associates, an
e-commerce distribution and logistics consulting firm in Allentown,
Pennsylvania, says the U.S. Postal Service (USPS) provides the most
affordable delivery options compared to other carriers. Here, he
compares how much it would cost to ship a 3-pound package from
Allentown, Pennsylvania, to Norcross, Georgia: